Amazon’s quickly becoming the online retail marketplace. Besides their well-known discounts, they offer some enticing perks to ensure customer loyalty. You can sign up for an Amazon Rewards Visa Card, load cash into an Amazon wallet, and get a credit score from the company’s virtual assistant Alexa.
Now Amazon’s getting ready to roll out checking accounts. It’s still in the early stages, but it looks like eventually it could come into fruition. Especially if you’re a frequent Amazon customer, an Amazon checking account may seem like a great deal. But does it come with hidden costs?
What’s Ahead:
What to expect from an Amazon Checking Account
The company hopes to form a partnership with a large bank like JP Morgan Chase or Capital One. Amazon wouldn’t become a bank itself but would work with another financial institution. Together they’d offer an Amazon-branded checking account.
Account holders would get a completely digital and mobile product—no giant books of paper checks. You could potentially pay rent and utility bills through the account, as well as stock up on essentials online. And you’d get a plastic debit card which would work like any other debit card.
Amazon’s also floating a number of consumer perks. The company might offer lower fees for transferring money into the account, for example. Account holders would also score rebates and deals on Amazon products.
The perks: Easy, familiar, and inexpensive
The company has a target market—young people. An Amazon checking account’s designed to appeal to millennial users, particularly those without bank accounts or credit cards. Amazon’s known for targeting consumers during big life changes (think graduation, marriage, moving, or buying a home). In many cases these transitions happen during your twenties and thirties.
Amazon plans to pitch their account as the perfect solution if you’re turned off by high bank fees, struggling to get a credit card because of student debt, or just don’t trust banks. High fees are a big red flag to millennial customers shopping for a bank. Other bank account regulations, like minimum account balances or overdraft charges, could make Amazon’s checking account seem like a bargain.
Consumers might also be more likely to get an Amazon checking account because they’re familiar with Amazon. Name and brand recognition are huge forces in marketing. A recognizable name inspires trust. One survey discovered thousands of US banking consumers trusted Amazon with their money as much as they trusted banks.
Besides, if you already spend lots of money on Amazon, the checking account will simply streamline the process. Groceries? Clothing? Movies? All instantly accessible in one place. To make the process simpler, purchases are linked straight to your bank account.
This sounds great—at first. But you might see a problem already. Will an Amazon checking account make you more likely to buy things you don’t need, just because it’s convenient? Maybe. There are a few other potential pitfalls.
The downsides: Data privacy issues and spending temptations
It’s no secret Amazon makes it easy to spend money. If you’ve ever browsed their “suggested” or “recommended” sections after making a purchase, you’ve seen how the site’s algorithms track your spending habits. This targeted advertising isn’t limited to Amazon. Have you ever spent time on a website, then had an ad for that website pop up on a social media accountlike Facebook? Large companies follow your spending all over the Web—so you’ll spend more.
And Amazon probably knows more about you than many other companies do. Amazon’s market share gives the company access to massive amounts of information. They observe consumers’ online browsing, shopping, and payment habits and collect sets of info known as “big data.” Companies use big data in all kinds of ways. For instance, Amazon can decide what items to stock—and how much to charge for them—based on what people buy.
How does this data collection affect you? You guessed it: You may spend more money than you otherwise would. Amazon’s targeted advertising is excellent at using the power of suggestion. Let’s say you buy something on Amazon you really need. Or maybe you put an item on a wish list, hoping to save for it eventually. Amazon will suggest similar products based on what other customers purchased after buying your item: kitchen gadgets, electronics, clothing, you name it. Even if you hadn’t planned to buy anything else, something may catch your eye.
Unplanned and impulse purchases can tempt the best of us. Amazon knows this well. Their method of suggesting products, a process called predictive analytics, earns the company up to 30 percent more revenue every year.
Privacy’s a major concern, too. The account will give the company access to much more of your financial data, like your account balance and where and how you spend money. Amazon has an ulterior motive. It’s a retail giant first and foremost. Its goal is to get you to spend more, not to save, budget, or invest.
Expect to see even more personalized, targeted ads with an Amazon checking account. And more ads don’t always mean better deals. Some analysts fear Amazon will raise prices on certain items if it knows how much money customers have to spend.
Huge companies like Amazon are also especially vulnerable to security breaches. The more big data companies have, the harder they have to work to keep all that data secure.
Alternatives to an Amazon Checking Account
Fortunately, if you want a free or low-fee checking account, you have options other than Amazon.
Where can you get a free checking account? We’ve rounded up a few picks for you.
Chime
Chime offers a checking account that has everything you could want in an online checking account and more. Below is everything you get with :
- Easy-to-use mobile financial app.
- No fees (that includes overdraft, minimum balance, and foreign transaction fees).
- Automatic savings transfers.
- The ability to get your paycheck early with direct deposit.
* Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank, N.A. or Stride Bank, N.A.; Members FDIC. Credit Builder card issued by Stride Bank, N.A.
^ Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account.
1 Save When I Get Paid automatically transfers 10% of your direct deposits of $500 or more from your Checking Account into your savings account.
3 Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.
Aspiration
Aspiration is a “neobank” that is actively trying to help fight climate change, especially through their banking methods. With Aspiration, you’ll get:
- 55,000 free in-network ATMs.
- 3%-5% cash back on Conscience Coalition purchases.
- The option to plant a tree with every roundup.
- Get paid up to two days early.
- The option to upgrade to the Aspiration Plus account, which offers even more advanced features.
LendingClub
With LendingClub, you not only get fee-free checking, but you can also earn money on your balance. In addition to no monthly fees, you’ll get:
- Unlimited 1% cashback on debit card purchases.
- Up to 1.15% APY on your account balance.
- Minimum opening deposit of only $100.
- No minimum monthly balance after initial deposit.
- Rebates on fees you pay at any ATM.
Open a LendingClub checking account.
Summary
You can get the perks of an Amazon checking account without the drawbacks. Take a look at the online and digital services the account offers. See how the bank will protect you against loss or theft, and how you can protect yourself.
Investigate what interest you’ll be able to accrue from the account. The best checking accounts will be convenient and help you meet your financial goals.
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